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Trust, Leniency and Deterrence

Author Info

Listed author(s):
  • Bigoni, Maria

    ()

    (University of Bologna)

  • Fridolfsson, Sven-Olof

    ()

    (The Swedish Competition authority (Konkurrensverket), Research Institute of Industrial Economics (IFN))

  • Le Coq, Chloé

    ()

    (Stockholm School of Economics, SITE)

  • Spagnolo, Giancarlo

    ()

    (Tor Vergata University, Stockholm School of Economics, SITE, and CEPR)

Abstract

This paper presents results from a laboratory experiment studying the channels through which di erent law enforcement strategies deter cartel formation. With leniency policies o ering immunity to the rst reporting party, a high ne is the main determinant of deterrence, having a strong e ect even when the probability of exogenous detection is zero. Deterrence appears to be mainly driven by `distrust'; here, the fear of partners deviating and reporting. Absent leniency, the probability of detection and the expected ne matter more, and low nes are exploited to punish defections. The results appear relevant to several other forms of crimes that share cartels' strategic features, including corruption and nancial fraud.

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File URL: http://www.kkv.se/globalassets/publikationer/workingpaper/working_paper_2014-2.pdf
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Paper provided by Konkurrensverket (Swedish Competition Authority) in its series Konkurrensverket Working Paper Series in Law and Economics with number 2014:2.

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Length: 38 pages
Date of creation: 18 Sep 2014
Handle: RePEc:hhs:kkveco:2014_002
Contact details of provider: Postal:
Konkurrensverket, 103 85 STOCKHOLM, Sweden

Phone: 08-700 16 00
Fax: 08-24 55 43
Web page: http://www.kkv.se
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More information through EDIRC

Keywords: Antitrust; Betrayal; Cartels; Collusion; Distrust; Fines; Leniency; Whistleblowers;

Other versions of this item:

Find related papers by JEL classification:
  • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
  • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
  • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
  • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
  • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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Cited by:

  1. Joseph E. Harrington, Jr., 2011. "Corporate Leniency with Private Information: The Push of Prosecution and the Pull of Pre-emption," Economics Working Paper Archive 573, The Johns Hopkins University,Department of Economics.
  2. Harrington, Joseph E. & Hernan Gonzalez, Roberto & Kujal, Praveen, 2016. "The relative efficacy of price announcements and express communication for collusion: Experimental findings," Journal of Economic Behavior & Organization, Elsevier, vol. 128(C), pages 251-264.
  3. Carsten J. Crede & Liang Lu, 2016. "The effects of endogenous enforcement on strategic uncertainty and cartel deterrence," Working Paper series, University of East Anglia, Centre for Behavioural and Experimental Social Science (CBESS) 16-08, School of Economics, University of East Anglia, Norwich, UK..
  4. Sascha Behnk & Iván Barreda-Tarrazona & Aurora García-Gallego, 2012. "Reducing deception through subsequent transparency - An experimental investigation," Working Papers 2012/14, Economics Department, Universitat Jaume I, Castellón (Spain).

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